RANCHI, India, Oct 8: Mittal Steel Co., the world’s top steel maker, signed an agreement on Saturday to build a 12-million-ton steel plant in eastern India, the company said in a statement.

Under the agreement, Mittal Steel will invest about 400 billion rupees ($9bn) to mine iron ore and build the steel plant in Jharkhand.

The project would be developed in two phases of six million tons each with the first phase expected to be completed within 48 months of the agreement. The second phase would be completed within 54 months after the completion of the first.

The agreement was signed by the state chief secretary P.P. Sharma and the London-based founder and chairman, Lakshmi Mittal. The plant will be Mittal’s first in India, his birthplace.

“Mittal Steel now intends to undertake a detailed project report to identify the location (of the plant), iron ore and coal mines and water resources,” the company said in a statement.

The company will also study the possibility of setting up of power plant of 2,500 megawatts to provide electricity to the steel plant.

Steel-making and mining firms have been drawn to India’s steel industry because of its affordable labour and the world’s third-largest deposits of coal and iron ore.

Mittal is the second foreign steel maker to sign a deal in India to turn its iron ore reserves into steel, demand for which is expected to boom with India’s economy, Asia’s third-largest, growing at about 7 percent a year.

“Steel consumption in India is said to experience considerable growth in the next decade and it is therefore a natural market for Mittal Steel to build a production presence” the company said.

In June, South Korea’s POSCO signed a deal for a $12 billion steel project in the eastern state of Orissa, a record foreign direct investment for India.

Jharkhand, with estimated iron ore reserves of 3.61 billion tons, has already signed steel project proposals with Tata Steel Ltd., India’s second-largest steel firm, and smaller companies such as Essar Steel Ltd. and Jindal Stainless Ltd.—Reuters